RBI’s new relaxed rules for opening bank accounts!


Indian banks have always been notorious for seeking too much documentation for a simple process. Even for a opening a savings bank account, our banks require detailed information about the account holder including a recent photograph, address proof, identity proof and the account opening form. Some banks also require introduction for any account holder with the same bank before opening a new account. While the lengthy and tedious documentation process has been built as per the norms issued by the Reserve bank of India, things are changing for good as the RBI has issued relaxed norms for account opening in both public sector and private banks. The relaxation in KYC norms were announced in order to make sure that even larger number of people were able to open their bank accounts under the Prime Minister’s Jan Dhan Yojana. With the relaxation of KYC norms a large number of everyday banking users would sense a sigh of relief as they would not have to run from pillar to post to get all documents in place for a simple process of opening a bank account. Let us look at the new KYC norms and how they stack against the earlier norms and its impact on the common man.

Old Norms versus New Norms: As per the older KYC norms issued by the Reserve bank of India, any individual seeking to open a new bank account with any private or public sector bank needed to submit an address proof along with an identity proof and recent passport size photograph. The identity proof that was accepted included any document with the individual’s photograph issued by any central or state government agency. Documents including passport, driving license, Voted ID card, PAN card, Aadhar card were accepted. Similarly the individual had to furnish proof of address by submitting any documents with the current address of the individual. In case the individual was not living in the address mentioned in the document or was staying away from home due to work commitments, the account opening process would often end up in a dilemma.

Now with the new KYC norms, the Reserve bank of India has issued guidelines that any one document with photograph and address of the individual would be sufficient to open a new bank account. Users need not submit two dedicated documents for address and identity proof and a single document would be acceptable by all banks.  In case of migrant workers or others who are not living in their current address or residence simply need to submit a self attested document declaring his or her current address while submitting the identity proof document with photograph.

Single Document Proof to Suffice:

The address proof and identity proof often had users confused as sometimes one document was revealing both the desired information. For example a user submitting a driving license as an identity proof was also submitting his or her address proof since a driving license carries the permanent address of the individual.  Some people especially poor migrant workers often found it difficult to furnish an address proof since they were temporary residents in other cities for work making them ineligible to open a bank account in the city of their stay. Now with new KYC norms seeking only a single proof, the documentation process has become simpler and more convenient for everyone concerned including banks and individuals.

Small Accounts Permissible without KYC Documents:

 In case someone has no documents as per the KYC norms, banks have been issued guidelines by the Reserve Bank to open small accounts for such individuals. The only requirement of opening a small account is a self attested photograph of the account holder along with a signature or thumb print given in the presence of a bank official. All small accounts would be operational for a period of 12 months. The account holder can submit his or her KYC documents at any time in those 12 months to regularize the bank account. Small accounts have some pre assigned limits including maximum credit of Rs. 1 Lakhs per year, a maximum withdrawal limit of RS. 10,000 per month and maximum account balance must never exceed Rs. 50,000 at any given point in time. Once KYC norms have been submitted and the small account is regularized, all such caps on credit limit and withdrawals are removed.

New Norms a Boon for the Common Man:

The new KYC norms have come as a boon for the common man especially lower middle class and people working away from their home. Since most of them did not have any documentation pertaining to their address proof in cities where they work, they were often finding it tough to open a bank account. Now with a single documentation process in place, all such migrants and people living in semi urban and rural areas across all economic parameters would be able to have their own individual bank accounts.

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